Marcopolis presents the Bahrain Report focused on the investments, doing business, economy and other topics featuring interviews with key executives and government officials. The sectors under review are industry, telecom, banking sector, ICT, investments and more.

Bahrain Shipping APM Terminals Bahrain

Moody’s expects the next two years to be highly challenging for the container shipping industry. How do you assess the situation in this industry and what is the industry outlook?

Bahrain Shipping APM Terminals Bahrain: The shipping industry is really for the shipping lines to make their comments on. All I can talk about is Bahrain and the container volume coming in. Bahrain has not seen much of a difference; we actually have slightly higher numbers in 2009 compared to the first quarter of 2008. For us it is all about the market, what is the market for containers locally? I don’t know what the market is for shipping lines globally; every shipping line according to the papers is not going through excellent times at the moment, but for us in Bahrain we’re doing quite well. We would like to see more volume, and we aren’t seeing the increases that we saw in previous years, but we’re still better than last year. I have not seen anything in Bahrain that indicates that things have come to a halt. I’m not a shipping analyst. We run the Bahrain Port, and the Khalifa bin Salman Port is busier than it was last year, and that is what I can relate to.

By how much?

Bahrain Shipping APM Terminals Bahrain: The growth we have is 2 to 3% more than last year so it is not dramatic numbers.

During the opening of Bahrain Gateway at Khalifa bin Salman Port, Chief Executive of the EDB, Sheikh Mohammed bin Essa Al Khalifa stated “We welcome the opening of the gates to this new facility which brings Bahrain one step closer to becoming a major shipping hub for the northern Gulf.” How do you assess Bahrain’s potential to become the major regional transportation hub?

Bahrain Shipping APM Terminals Bahrain: There is one thing that counts a lot in this world and that is cost. There is one way to cut costs and that is to reduce your distance of shipping. Bahrain is closer to all the other gulf markets than any other hub. So if you map it out and start measuring distances from this port to all the other ports as a hub, then Bahrain is actually closer than any other port. That proximity plus the fact that we are actually open and are here is an advantage. Because the shipping lines at the moment are doing various VSA’s (Vessel Sharing Agreements), it requires coordination with a large number of companies for a single piece of business. It is a little more difficult to negotiate with the shipping lines today than it was eight months ago because of the global credit crunch or what ever you want to call it. The lines are looking very closely at their cost pictures, and that means that some lines are entering into VSA, which means that they are going to be using others’ ships etc. The whole point here is to get a trans – shipment line in, when you get the line in you get the feeder network and then everything works from there. But we need to break the ice and it is fair to say that that ice is not been broken yet.

What are the steps for it to be broken?

Bahrain Shipping APM Terminals Bahrain: If we had opened in August last year, everybody would have jumped on us because there was congestion in all the ports and everybody wanted to find new capacity. We were creating that capacity. Now that we have the capacity, so does everyone else at the moment. There are no capacity constraints at the moment. At the same time, every time you move a line somewhere else there is some doubt as to what are the service levels. So we need to be up and running a couple of months to prove to the lines that it is absolutely safe to put big ships in here.

For the moment, do you have the customers?

Bahrain Shipping APM Terminals Bahrain: There are not that many shipping lines in the world so it is the same shipping lines; APL, CMA CGM, MSC, OOCL, Emirates, UASC, they are all there, and everyone is already calling Bahrain in some shape or form. Some of them may even have investments going in here.

In your opinion what are the major challenges for Bahrain to achieve this goal to become the major regional shipping hub and what could be done to further strengthen its position?

Bahrain Shipping APM Terminals Bahrain: When you have spare capacity to sell, but everybody else has spare capacity as well. At the end of the day we need to get a shipping line in here and convince them that this is the ideal hub. Because as soon as you have the first line, and you get your feet in the network everything is easier from there on. But we need to get that first shipping line in, we need to convince a shipping line to take that first step. It is a big step for shipping line to move hubs. In general the shipping lines prefer to deliver everything direct to the country and have no transshipment. Transshipment is just a cost for them; if we get the first one and we can move from there.

How close are you to breaking?

Bahrain Shipping APM Terminals Bahrain: We have three or four lines that we are in negotiations with. In this day and age I’m not going to say that we are going to sign next week or next month because it may not materialize; then again hopefully it will.

How does this process of negotiations work? Can you explain to our readers how you break; for us it is not clear because we do not do business the same way in general?

Bahrain Shipping APM Terminals Bahrain: Actually it is not that different from normal business. What we do is you create some kind of value proposition for your clients. The number of clients is very limited; they are just the shipping lines. It is not the consumer on either end; they are not too interested in whether and where it is transshipped, as long as the facility is there for it to arrive on time then they are happy. What you do is you create a value proposition to explain the cost benefits of using Bahrain as a hub. So, in simple terms, we take a specific carrier’s network of services, and demonstrate to them that, by extending the main network to Bahrain, you will add x amount of steaming time. But this additional cost is more than off-set by the savings to be made on the feeder services to Kuwait, Saudi Arabia, Iraq, Iran. Then they look at that cost picture combined with their volumes; is that a cheaper way of doing it than by doing it from somewhere else? It is just to prove that it is cheaper because we are closer, and that is the whole point. Is it going to happen this month or in November, I do not know. But the capacity is there for the upper gulf.

With the global recession in the industry and competition from other terminals in the Gulf such as Port Khalid and Jebel Ali, how do you expect to attract the container ships? What is your competitive advantage?

Bahrain Shipping APM Terminals Bahrain: It is availability and location. Location as in distance to other ports. It is our added value, it is easy to access Bahrain. The capacity is available and the distance to the other markets is superior to actually the other ports; 40% closer if you measure it against Jebel Ali, we’re closer to the upper gulf.

What other markets are you planning to serve in the future?

Bahrain Shipping APM Terminals Bahrain: The northern gulf is the only natural market for Bahrain. It is too much of a detour to go to Bahrain if you’re going on the big east west trades. So the big east west trades will be covered by Salalah and other ports further south. They are not going to send ships all the way into Bahrain to then send them through the Suez; that is not a realistic proposition.

In terms of capacity that Khalifa bin Salman Port can handle, how much are we talking about?

Bahrain Shipping APM Terminals Bahrain: With the current equipment we can handle about one million TEU (which are 20 foot containers). The port can easily be expanded up to two or 2 ½ million TEU. It is all a matter of how many cranes, how much equipment you put in and buy. But when we get to 12 cranes then we need expansion.

You declared that “APM Terminals wants to help Bahrain in its import and export endeavors and be the leading player in its development.” Furthermore, you mentioned that you would like to bring the major shipping lines to Bahrain. What effects do you think APMT has had on the industrial development of Bahrain?

Bahrain Shipping APM Terminals Bahrain: As a professional operator, we are able to bring in experience and grow on best practices used by a lot of terminals around the world. We have training programs made out, we are buying equipment and we have that equipment in a lot of ports so we know the exact specifications we require; what is needed, what training is needed, we can educate the people. From when the government was running Mina bin Salman, compared to after APMT took over, we actually doubled the productivity levels. When you have an international pool of people you can draw on, you have experience, you have a head office that does nothing else, whereas the government does not have much of a chance if that is the only port they run. So they’re not going to get that experience that we can draw on from all other ports and the best practices from all over the world.

I have read that one of the major challenges is getting the staff and professionals to this area. Are you still facing this challenge?

Bahrain Shipping APM Terminals Bahrain: I don’t know who ever said that. It is not me. We don’t have any problems getting staff here, we don’t have any problems getting international staff here either. We had a training issue when we took over. We needed more people fast. But I mean that problem is really behind us now. When we look for people in Bahrain we get a lot of applicants, we have a lot of good Bahraini people here. We work with more than 86% Bahraini people in the force, which is very high. We don’t have problems getting people, I don’t know who told you that but it wasn’t me. With training, of course when a new operator moves in and uses IT systems they’ve never seen before, you’re going to get some people who say this isn’t for me and then you need to train others. But that that is a normal evolution; I don’t see any issues in that, that’s just ongoing. We have moved over here from MSP, and there’s a lot of training required; it’s new equipment and new systems but that’s normal, it’s just part of the game.

How many people are you employing at the moment?We have 600 plus people here.Are you expecting to expand this number?

Bahrain Shipping APM Terminals Bahrain: It may be a bigger port; we have a bigger port here than we did in Mina Salman, but at the moment we don’t have more cargo, and people kind of follow the cargo. If anything we should be more efficient with new equipment, better IT systems, etc. That is something that is constantly being looked at, but it doesn’t matter how big the port is if the cargo is the same.

You said “We have been speaking with Bahrain international investment park and the Bahrain logistics zone, particularly on the issue of promoting Bahrain.” How do you envisage this cooperation?

Bahrain Shipping APM Terminals Bahrain: Anything that makes Bahrain interesting to international investors. I know this is not for real but let’s say that Bahrain logistics zone could attract a car assembly plant. That would bring a lot of business to the port. It is all in our interest that Bahrain is promoting these international industrial parks and logistics zones because of more cargo that you would see in and out of the port. We play an important part because today we can sign up and deliver a feeder network to the upper gulf. It becomes even more attractive to international investors to be here. But in general we support this whole heartedly and get involved in it as much as we can because at the end of the day it is in our interest too.

Can you comment on what projects are coming to Bahrain in the future that you know of?

Bahrain Shipping APM Terminals Bahrain: There are a lot of projects going on in Bahrain. The Bahrain logistics zone is the most important one for us at the moment. The word speaks for itself. The idea is to have imports, exports and that’s how we make a living, by transporting containers over the quay wall. So that is of a major interest to us. We have to make sure that the gate processes are smooth, that we work with customs, with the organization of seaports to make sure that everything runs smoothly, that importers and exporters face as little obstacles as at all possible.

In April, APM Terminals Bahrain opened its truck gates at Bahrain Gateway at Khalifa bin Salman Port, ushering in a new era for the region, and offering ocean carriers new ways to optimize their Upper Gulf route network to serve the growing regional market. What are the major challenges you are facing and what needs to be done to ensure the smooth transition of this new port?

Bahrain Shipping APM Terminals Bahrain: When you move a big facility from one side of the road to another there are usual logistical issues. Here it is more an issue of training, because we are going into cranes that are 50% faster and they have totally modern engines and motors in them. The same with the quay cranes and the yard cranes; everything is brand new. It is new to the operators, it is new to the repair people, so again it is all a matter of training, training, training. Anything else is just a logistical issue, and that is what we’re paid to do, to move this around. We have some 600 containers at the other side, some 36 cars in MSP, and that is all that is left over there. We have moved everything else.I think it is a tribute to the way the community has worked very closely with us; the whole of Bahrain has been on side making sure that this has gone really smoothly.

Can you give us some examples that show the commitment?

Bahrain Shipping APM Terminals Bahrain: We spent quite a lot of time before the move engaging with the local community, all the various stakeholders, to make sure they were aware of what was going to be happening and to try and minimize the impact on the local communities; the truckers, the clearing agents, the importers themselves. What we found was that there was great support in terms of making sure people were coming to the right port to pick up that cargo in advance, to make sure that cargo wasn’t being left behind unnecessarily delaying the whole migration process; that the truckers were being advised and that there was good support from both the trucking companies and the clearing agents to make sure that they knew where they should be coming so that there wasn’t too much confusion in the market. The opportunity for total bedlam out there was actually substantial with truckers going to all the wrong ports and this kind of thing. It didn’t happen, and I think that was largely a result of a feeling in the whole country that we’re going to work together to make it happen.

Generally our readers want to know whether or not it is in their interest to come and invest in Bahrain. They want to know as foreign companies what people find when they come here. Do they find an easy environment to work with?

Bahrain Shipping APM Terminals Bahrain: I think it is important when you talk about ports to say that people care. The average producer absolutely cares that there are proper port facilities there. When you don’t have proper port facilities, it is difficult to get your cargo in and out of the port and that is a hassle for importer and exporter alike. So obviously as a big importer or a big exporter, you want to make sure that the port facilities are also up to standard. So it is important that Bahrain can now show that we have a brand new port; it is not stuck in the middle of a city somewhere with impossible access, it is brand new, it is modern, all the equipment is there with an international operator running it. That is all the importer or exporter wants to know. After that it is more technical, you come to the shipping lines and start talking productivity and other things. But for the average importer or exporter, they need to know that there’s a proper port there and they need to know it is easy to deal with. There is this famous expression in Bahrain “business – friendly Bahrain.” To set up companies and all this in Bahrain –I wasn’t here when we setup –but I heard that everything went smooth, and that is what we hear from other people as well, that it is easy to setup here, it is very smooth, there’s not too much bureaucracy around and that is what people want to know. That is what the government is telling them. We can sell business – friendly Bahrain as having a port with easy access. But it is also up to the government to sell that we will make sure that the rules and regulations are so that it is easy to deal with, and so far they have managed that. Bahrain didn’t come out of nowhere, it is because it is business friendly and they are doing a lot. We have a general organization of seaports, we have the economic development board, everybody is interested in the same thing and that is promoting Bahrain, and everybody works together to do this.

As operator of this port, what are your strategic goals for 2009 and 2010; what would you like to achieve?

Bahrain Shipping APM Terminals Bahrain: What we would like to achieve here in the next three or four years is to double the volume that we have today. At the moment, the local market in Bahrain is about 300,000 TEU. Within five years we need to be at about a million.Those million TEU’s will be made up of a combination of local market and transshipment. The local market will continued to grow at the speed that it does, we really have no control over that. So to go from 300,000 TEU’s today to a million within the next five years is obviously going to require the transshipment business to start.

We are going to deliver an award for the greenest company in Bahrain in our report. APM Terminals teams with U.S. Environmental Protection Agency on hydraulic hybrid technology. How much is APM terminals implicated in sustainable development?

Bahrain Shipping APM Terminals Bahrain: With sustainable development in the U.S, you’ll have to ask the U.S about that. I have seen some of the reports from there, and we have seen internally what they’re trying to do and helping, especially in California where they’re working with various things. But to get the details, I don’t know, you’ll have to ask the Americans about that. For Bahrain, what we have done here now is we have now started waste recycling here and that is relatively new. We have designed washing facilities so we reuse the water when washing containers; we have various collection bins so we don’t have any oil spills. All our cranes are fully electric, there is no diesel. Our RTG’s (Rubber Tyre Gantries) are fully diesel and we have 12 of those, but if you look at the cranes, what we have basically done is the water recycling and the waste recycling or waste separation. Those are the two things that we have worked a lot on initially.

In terms of social development how much are you giving to the community?

Bahrain Shipping APM Terminals Bahrain: We participate in a number of programs. The latest one was that we were participating in renovating a house for a needy family where we donated furniture and money to actually get the house refurbished. But we also contribute to the Red Crescent, we support them. We have a student in the UK at the moment, he has two more years to go, we put him into a logistics college. So we’re part of these various programs, we support the local community and we want to be in the local community. Personally I see the biggest support that we can give the local community is to generate so much more cargo that we can employ more people. That is the way I see the biggest support that we can give to the local community.

What other environmental initiatives are you to undertake in the future and what are the strategies you can adopts to cope with increasing environmental concerns?

Bahrain Shipping APM Terminals Bahrain: There are many initiatives. You don’t want to have 200 trucks sitting outside your port with the engines running in blowing diesel all over the place. At the same time, inside the port you want to make sure that it is as smooth as possible, so people can get in and out and you don’t create unnecessary pollution. In a port with diesel RTG’s and trucks driving around there will be a certain amount of pollution, but our company has worked a lot on creating some eco-friendly, working with crane companies to reduce the CO2. We can work to control the diesel, for example how many reefers in the port do we use, do we use electric power instead of diesel. There a lot of things you can do for the environment. We’re also working with the shipping lines so that they don’t have to run their diesel engines while at port. All those facilities are basically not needed in a feeder port which we are at the moment. But there are a lot of initiatives going on and our company is at the forefront on a lot of these issues. You are getting the shipping lines to help the ports and the ports to help the shipping lines. But to regulate, you also need the trucking lines to help out, it is a whole lot of people that needs to be in this. But we are working on this at various levels.

Do you think the Bahraini government is concerned about this issue, as you said everyone has to work together?

Bahrain Shipping APM Terminals Bahrain: I think everybody is concerned about climate and CO2, especially the Bahraini government. Just in the last two weeks you have seen waste separation which is something I have never seen before. The government is doing fine and is doing a lot to protect the environment. People are not throwing trash out of their cars anymore, you still see the odd one, but it’s all about mass information and awareness. And you create that awareness by being on top of people. The government is doing something about it and they’re trying to make sure that we do something as well, like the waste separation and the water recycling, and the government is a part of all of this.

Is there any message you would like to address to our audience our readers and viewers about Bahrain and APM terminals?

Bahrain Shipping APM Terminals Bahrain: We are here. We are here, we are open, we have space, that is the message we’re sending to the shipping lines. Eight months ago there was a severe shortage of capacity in this region and you can make your own estimates as to how long the global credit crunch is going to last. I don’t have my crystal ball with me, I don’t know, but it will stop and then things will be moving again and the capacity here will be needed straightaway. We hope to attract people who also see that. Bahrain is more diversified than a lot of the other economies around here, and they have a very business – focused government. They are regulating it, they’re promoting it. They set up the economic development board with their Vision 2030, and they’re not just talking about it. They are backing up. It is a little bit putting your money where your mouth is, and they are doing that.